Caveats

This guidance covers caveats, which warn ongoing court action relating to a property.

We note caveats in the property section of a title sheet. They do not prohibit transactions on a property, but they do act as a warning to any party who may intend to transact with the property.

Caveats prevent a person from claiming to be acting in good faith at the time of a transaction if we later adversely rectify a title as a result of the court action.

Background

The Land Registration etc (Scotland) Act 2012 ("the Act") introduces a statutory system of caveats into land registration. A caveat acts as the publication on the title sheet of an ongoing court action and is intended to act as a warning to any party who may intend to transact with the property. Although the existence of the caveat does not prohibit transactions on the property, the effect of it is to prevent a person from claiming to be in good faith at the time of the transaction if the Keeper later adversely rectifies a title as a result of the court action.

A caveat has the effect of preventing rights from realigning under Part 9 of the Act as a person cannot claim to have transacted in good faith when the caveat has alerted them to the existence of the court action. Transacting in the face of a caveat may also cause any compensation paid by the Keeper to be less than would be payable had there been no caveat on the title sheet as a caveat may lead to an exclusion or limitation of warranty from the title.

Obtaining a caveat

A party to ongoing civil proceedings can apply to the court for warrant to place a caveat on the title sheet of a plot of land to which the proceedings relate. Warrant to place a caveat on a title sheet can be granted by the Court of Session, the Sheriff Court or the Lands Tribunal for Scotland and can be requested at any time while the proceedings are in dependence. There are three distinct categories of civil proceedings for which a caveat can be applied for, namely those:

for the reduction of a registered deed on the ground that it is voidable,

which could result in a judicial determination that the register is inaccurate, or

for an order which, if granted, would be registrable under section 8A of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 (c.73) (registration of order for rectification).

The applicant applying for warrant to place a caveat on a title sheet must be able to satisfy the court that there is a prima facie case; that there is a risk of the applicant being prejudiced by the other party to the proceedings dealing with the property and, that in all circumstances, it is reasonable to make the order granting a caveat, including the effect which granting the warrant may have on any person having an interest.

The type of civil proceeding constituted by the action, by reference to the relevant subsection of s.67 of the Act, and

In respect of each plot of land affected by the caveat:

a description of the plot

the title number, and

the name and designation of the proprietor

It should be noted that should the caveat relate to only part of a plot of land, a plan should be appended to the court motion indicating the area affected. There is no requirement for a plan annexed to a caveat to be delineated on the cadastral map however it will be archived with the court order in the archive record of the land register and an extract or plain copy can be issued on request.

The caveat must then be submitted to the Keeper by the applicant along with the Keeper's Form 'Application relating to a Caveat'.

Placing the caveat on the title sheet

Once RoS has received an application to place a caveat on the title sheet the Keeper will reflect the details of the caveat from the court order on the appropriate title sheet(s) as soon as practicable as the caveat does not take effect until it is placed on the title sheet. It is therefore recommended that the applicant apply to the Keeper for noting of the caveat on the title sheet as soon as possible after warrant has been granted by the court, in order to give effect to it at the earliest opportunity.

The caveat is reflected by way of a note which will appear in the property section of the title sheet and will detail that the caveat will expire 12 months from the date the note is entered (unless renewed). As the details of the court action and the deed being challenged will not be discernible from the court order it was decided that the caveat should always appear in the property section of the title sheet. This process allows for a consistent approach whereby the existence of a caveat will always be evident to parties searching the register.

The caveat is a note on the title sheet rather than a registration event and can therefore be placed on the title sheet at point of receipt without updating the date of the title sheet in the property section. The note that will be entered on the title sheet will be either:

The plot of land/subjects of the lease in this title is affected by a caveat in terms of section 67(2) of the Land Registration etc. (Scotland) Act 2012 granted by [name of court] in relation to [action raised under s.67(1)] in favour of [name and designation of person in whose favour order granted] for a period of 12 months from [date caveat note entered on title sheet]; or

Part of the plot of land/subjects of the lease in this title sheet is affected by a caveat in terms of section 67(2) of the Land Registration etc. (Scotland) Act 2012 granted by [name of court] in relation to [action raised under s.67(1)] in favour of [name and designation of person in whose favour order granted] for a period of 12 months from [date caveat note entered on title sheet].

Renewal, restriction, recall and discharge of a caveat

The court can also grant warrant to renew, restrict and recall a caveat under the provisions at sections 69 to 71 of the Act. In order for the court to be satisfied to grant warrant to renew an existing caveat or restrict the effect of a caveat, the same provisions must be met as for granting warrant for the initial caveat (that there is a prima facie case etc.). The 'Application relating to a Caveat' form must again be used when submitting the court order to the Keeper.

There is no limit to the number of times a caveat may be renewed although on expiry of the original caveat at the end of the 12 month period, the note will be removed from the title sheet. It follows that an application for renewal must be received by the Keeper well in advance of the expiry date of the initial caveat. Should the Keeper receive an application for renewal after the initial expiry date, the application would be rejected.

While an application for renewal of a caveat must be applied for by the person who requested the original warrant to place the caveat on the title sheet ("the applicant"), an application for the restriction or recall of a caveat can only come from any person with an interest other than the applicant.

If the court is no longer satisfied as to any of the criteria that must have been met when deciding to make an order granting the original caveat, it must make an order recalling the caveat. It is for the applicant to convince the court that the order recalling the caveat should not be made.

Under section 72 of the Act, a person who has been granted warrant to place a caveat on the title sheet or renew a caveat may at any time discharge the caveat without any recourse to the court. The 'Application relating to a Caveat' form must be filled out with the relevant details of the caveat to be discharged and submitted to the Keeper in order for the note relating to the caveat to be removed from the title sheet.

The fee for entering, amending or removing the terms of a caveat from the title sheet is £60.

Rejection criteria

As the Keeper's role is to reflect the details of the caveat in the title sheet and bring the 12-month period of effect into force by entering the appropriate note in the property section, it is envisaged that there will be limited circumstances in which a caveat application may be rejected by the Keeper. The only grounds for rejection of a caveat would be:

if the description of the property is at variance with the title number(s) quoted;

all of the title numbers affected are not included;

there is no completed title sheet available i.e. a caveat can only be placed against a registered title and is not appropriate for subjects in the General Register of Sasines or still in the land register application record pending registration;

the original caveat has expired and an order for renewal, recall or restriction is submitted after the reference to the caveat has been removed from the title sheet;

details of the warrant as prescribed in the Act of Sederunt are omitted from the court order.

Effect on warranty and compensation

In terms of section 75(2) when considering whether or not to extend, limit or exclude warranty the Keeper must have regard to any relevant caveat placed on the title sheet by virtue of section 67.

Placing the caveat on the title sheet will not affect the warranty already given, since warranty is tied to an earlier date, i.e. the last date of registration. However, when registering any subsequent application against that title sheet the Keeper must have regard to the caveat when considering the warranty to be given for that application. Whether or not the Keeper excludes or limits warranty will depend on the nature of the caveat.

The existence of a caveat on a title sheet may have the effect of reducing the level of compensation payable to a claimant. If an application is received to register a deed that affects a title sheet that is subject to a caveat, this may lead to the warranty that is given to the applicant being limited or excluded. If the register was to be rectified as result of the court action to which the caveat related, the exclusion or limitation of warranty would have an effect on the compensation that would be payable. The caveat appearing on the title sheet will alert third parties to a court action that may have bearing on the accuracy of the register and allow them to consider the consequences that this will have for any deed they register while the caveat is extant.

Effect on realignment

As a caveat is a warning of an ongoing dispute, a person purchasing a title that is subject to a caveat cannot claim to have acted in good faith. Therefore, the existence of a caveat on a title sheet prohibits the operation of the realignment of rights provisions at Part 9 of the Act.